TCS Daily

The Issue That Didn't Bark

Amazingly enough, Social Security reform doesn't seem to be inflicting any political damage on Republicans this fall.

Imagine that someone had told you in December 2004 that President Bush would spend the first half of the next year campaigning for Social Security reform, including personal accounts and cuts in future benefits. Further, that this campaign would fail, with every Democrat in Congress accusing Bush of planning to destroy the program and Republicans too scared even to schedule a vote on his plan. You would have assumed that the Democrats would use the issue to clobber Republicans in the next elections.

The Democrats are clobbering Republicans, but not by using Social Security. They are running on the Iraq war, Republican corruption, slow-growing wages, health care, and stem cells, but they aren't talking much about Social Security. Democrats used to think that hardline opposition to reform was a powerful political issue. Their current silence suggests that, at the very least, they think that other issues are more powerful.

To the extent that Social Security has figured in the campaigns at all, it has done so in one of two ways. Some Democratic challengers, borrowing a tactic that Republican challengers used to use, have accused Congress of "raiding the Social Security trust fund." And some congressional candidates have signed one of the dueling pledges about the program.

The accusation that the trust fund has been raided scares those voters who mistakenly believe that Washington has money stashed away somewhere for their retirements. But it's a little rich coming from a Democratic party that insists that the "trust fund" can pay for the program for decades to come. If the trust fund has been repeatedly raided, and is easy to raid, it can hardly be relied upon far into the future. But what's also noteworthy is that this trust-fund attack doesn't criticize Social Security reform.

Several liberal groups are circulating pledges against personal accounts, benefit cuts, or "privatization." They say that personal accounts would threaten the program. Never mind that every proposal introduced in Congress in recent years that would make it sustainably solvent has included personal accounts.

Some of the attacks on reform have backfired. AARP, the seniors' lobby, was, to its credit, relatively honest in putting signers on record behind a tax-increase solution to the program's insolvency. (It used the euphemism "additional contributions.") To its discredit, it ran away from the truth when Democratic candidates started facing criticism for wanting to raise taxes.

For Our Grandchildren, a bipartisan pro-reform group, has circulated its own pledge. It does not commit signers to personal accounts, but only to making the program solvent, with all options on the table. This pledge echoes Nancy Pelosi's comment, in an interview with Fox News in December 2004, that "we should put everything on the table" to fix the program "in a bipartisan way." But prominent House Democrats Charles Rangel and Sander Levin say that to look at all options is to open the door to personal accounts, and thus unacceptable. They urged their colleagues not to sign the pledge.

Nonetheless, 189 candidates have signed it, and roughly half are Democrats. Those Democrats include such sitting congressmen as John Salazar, Sheila Jackson Lee, Sanford Bishop, Marcy Kaptur, and Adam Smith. The AFL-CIO has promised to pressure Democrats to withdraw from the list, but so far only Rep. John Olver of Massachusetts has flaked off. So opponents of reform are saying that the Democratic signatories are dupes who can't see the dangerous privatizing agenda behind the letter. Rangel has changed his tune, saying that the pledge is too vague to be meaningful.

Tim Penny, a former Democratic congressman who now helps to lead For Our Grandchildren, says that the campaign season so far suggests to him that opposition to reform "is not proving to be a successful wedge issue." Liberals denied Bush a second-term policy victory and drove down his numbers, but they have not been able to make Social Security a winning electoral issue.

But the elections could empower people who are dead-set against reform. California Democratic congressman Pete Stark will chair a crucial subcommittee dealing with entitlements if his party takes the House. He has recently suggested that productivity growth can solve the program's problems and that its trustees are too pessimistic.

He is wrong on both counts. Social Security's benefits are tied to wages. If productivity growth causes wages to go up, then revenues will rise—but so will outgoing benefits. You have to cherry-pick data to show that the trustees have been too pessimistic. In 1983, the trustees predicted that the program would start paying out more than it takes in around 2020. In 1991, they predicted that 2017 would be when that happened. In 2006, they're predicting. . . 2017 still. Over the last fifteen years, all that has happened is that we have gotten closer to the date without doing anything about the impending problem.

The good news is that Social Security demagoguery doesn't appear to be working. That means that if Republicans gain seats a few elections from now, or if Democrats conclude that there are no political profits to be had in joining the know-nothing caucus, reform might become possible.

The bad news is that the clock is still ticking. Since 2003, lost time has increased the net present value of a fix by $1.8 trillion. And the more time passes, the more people become retirees whose benefits are politically untouchable. Sweden, meanwhile, has modernized its pension program to include personal accounts.